Economics of the Public Sector

Learning objectives 
At the end of the course the student is able to:

Required elective. Major-related elective. This course cannot be combined with the course Public Economics (LUISS).

This course applies your knowledge of macro- and microeconomics to public-sector issues.

Individuals and firms are repeatedly confronted with the influence of the government, e.g., when paying taxes, receiving subsidies, study grants or social security benefits, making use of roads, health care, public transport and educational facilities, or casting a vote during elections. Indeed, in most developed countries, the public sector has become an enormous economic force, accounting for 40-60 per cent of GDP. This means it often exceeds the size of markets in a functioning market economy. The optimal division of tasks is still a highly debatable topic:

• Which should be carried out by the public sector (e.g. the government) and which ones should be left to the private sector?
• When should the government intervene, and what are the welfare consequences for different groups in society?
• Which commodities and services should the government provide and how much? Should this be provided in a market-efficient manner or not?
• How high should taxes and public debt be?
• What kind of taxes should the government levy (e.g. income, consumption or corporate income taxation) and who, eventually, bears the burden of these taxes?

Nevertheless, due to the political nature of these questions, the answers are not always straightforward. Because of this, next to the theoretical framework, 'Economics of the Public Sector' is a course full of discussion to get interesting insights into the questions raised above.

The aim of this course is to analyse actual public policies and develop guidelines for government activities. We will address these questions by explicitly referring to your textbooks in microeconomics, macroeconomics and institutional economics. The real-world perspective also plays a crucial role as discussions are informed and shaped by real-life policy. Furthermore, the skills that students develop in class will be applied to a real-world case of their choice.
 

• Analytical skills
  • ​Being able to identify, interpret and critically evaluate the main line of reasoning, for more complex problems. 
• ​Communication skills
  • Being able to write a compact and instructed paper on a specific subject, both individually and in groups. 
• Information processing
  • ​Knowledge of potential sources for literature and data and the skills to explore these independently for a small research project.
  • Being able to detect plagiarism and being able to avoid any kind of plagiarism.
  • Providing correct references in text in a small research project (APA style).
  • Providing a correct reference list for a small research project (APA style).
  • Being able to present data in a correct and useful manner in a small and instructed research project. 
• Academic reasoning
  • ​Thinking conceptually, thinking in terms of theory.
  • Asking critical questions, having a curiosity-driven and critical attitude.
  • Analysing questions from different perspectives.
  • Identifying links between problems. 
• Social responsibility
  • ​Being able to work effectively in teams for a specific project with limited intervention or instruction. 

Format

One (pre-recorded or on-campus) lecture and one tutorial of two hours (group size 25-30 students) per week. Students should prepare the tutorial problems in advance.

Assessment method

Effort requirements
Students must be able to demonstrate that they have carefully prepared for the weekly tutorials, by submitting their solutions on Brightspace.